Tesco's £3.7bn takeover of Booker Group has been approved by the competition watchdog.
The CMA said that as Booker supplies shops - such as Premier, Londis and Budgens - that compete with Tesco, its inquiry group "considered the impact of this carefully".
"Booker does not own the shops it supplies and these retailers are free to set their prices and decide which products to stock. So, although these shops compete with Tesco, Booker cannot directly determine how they compete," the group found.
The CMA also examined whether the merged company could raise prices or reduce service quality at either wholesale or retail levels, but found that "existing strong competition in wholesale and retail" made this unlikely.
"We have carefully listened to feedback from retailers and wholesalers who operate in what are highly competitive UK retail and wholesale sectors. Retailers have told us that they shop around for the best prices and service from their wholesaler, and we are confident that this will continue after Tesco buys Booker," said Simon Polito, chair of the inquiry group.
"This has been an important investigation for us. Millions of people use their local supermarket or convenience store to buy their groceries or essentials, so it is vital that they have enough choice to secure the best deal for them. Having examined the evidence in depth, we are satisfied this will remain the case following the merger."
|The CMA's findings|
During the course of the CMA's inquiry, the group found that more than a third of independent retailers said that if Booker were to raise prices after the merger with Tesco, they might stop buying from Booker altogether, while only around a fifth would continue buying the same volumes from Booker, alongside their other wholesalers.
The CMA also considered concerns that Booker would be able to use Tesco’s buying power to purchase groceries from suppliers at lower prices and that other wholesalers might not be able to compete, which could lead to Booker eventually raising its prices if the choice didn’t then exist to keep prices competitive. But the CMA concluded that the wholesale market would remain competitive in the longer term, noting that Booker’s share of the UK grocery wholesaling market was not sufficient to justify these longer-term concerns and also noted that if Booker could get keener prices for its goods from suppliers, this might actually intensify competition in the wholesale market, leading to cheaper prices for the shoppers and caterers Booker supplies.